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SECURE Act 2.0 Changes 401(k) Plan Landscape for Small Businesses
SECURE Act 2.0 makes it easy and affordable for small businesses to offer retirement savings plans to their employees. Whether you have one employee or many, SurePayroll can help you find the right 401(k) plan for your small business.
Employees rank retirement plans second only to health insurance when it comes to benefits.1
Most small business owners agree that retirement plan packages help attract and retain quality employees. They also believe setting up a retirement savings plan is too expensive and too difficult to administer.2
The SECURE Act 2.0 signed into law in December 2022 is a game-changer for small business owners. Tax credit provisions in the act make it virtually free for small business owners to establish retirement plans for their employees.
Combining the tax advantages of the SECURE Act with the service available through Sure401k®, small business owners can easily and affordably help employees achieve their retirement goals while taking advantage of tax savings.
In a recent 401(k) webinar Tim McDonald, SurePayroll retirement expert, talked with small business owners about what is a 401(k) and how does it work. He covered the importance of retirement planning, the different types of 401(k) plans, the basics of establishing 401(k) retirement plans and the tax advantages now available thanks to the SECURE Act 2.0.
“If you were ever of the mindset that you couldn’t afford to offer your employees a 401(k) plan, times have changed,” said McDonald. “The SECURE Act 2.0 is most beneficial for small business employers with under 50 employees.”
Before digging into the details and incentives of the SECURE Act 2.0, McDonald briefly covered aspects of the first SECURE Act. The SECURE Act, which passed in 2019, offered some tax incentives for small businesses, increased access for full- and part-time employees and expanded deadlines.
The expanded coverage and increased savings in the SECURE Act 2.0 make offering retirement benefits more affordable than ever for small businesses with one to 50 employees.
“There are tremendous tax advantages for the business and the employee,” McDonald said.
For small businesses specifically:
- Up to 100% coverage of 401(k) retirement plan start-up costs for qualifying businesses—a potential savings of up to $16,500.3
- Eligible businesses that choose to give matching or profit-sharing contributions to their employee retirement plan may qualify for an additional tax credit of up to $1,000 per employee. 4
Understanding retirement plan options will help small business owners take full advantage of the savings available through the SECURE Act 2.0.
“Employer-sponsored 401(k) plans are popular because of their flexible plan designs and the ability to save much more than any other retirement plan, such as IRAs,” said McDonald.
McDonald then detailed the three Sure401k plans available, including the advantages of each for different small business types.
“It’s never been easier than now to start a 401(k) plan,” McDonald said. “Whether you are building a plan for yourself, your business, your employees, or a combination of all three, Sure401k can help.”
Sure401k plans include:
- Solo 401(k) is a great fit for sole proprietors or shared ownership. It gives owner-only and family-only businesses the ability to make the maximum allowable contributions to a small business retirement plan while providing access to accumulated balances through a loan feature.
- Traditional 401(k) offers the maximum flexibility with plan design. This plan allows employees to save for their retirement through payroll-deducted contributions while providing employers the option to make additional contributions to their employees' 401(k) retirement accounts.
- Safe Harbor 401(k) has a pre-set employee matching and vesting schedule which offers the maximum funding and saving opportunity for companies that have between one and 25 employees. These have benefits both to the employees of the business and the owner(s).
Small business employers can support their employees in building their future by starting a 401(k) plan for their business. SurePayroll, a Paychex company, can guide you in setting up a plan to meet your business needs.
Call 866-497-2028 to learn more about Sure401k competitively priced, quality 401(k) retirement plans.
1 https://www.shrm.org/about-shrm/press-room/press-releases/pages/shrm-releases-2022-employee-benefits-survey--healthcare-retirement-savings-and-leave-benefits-emerge-as-the-top-ranked-be.aspx -- Permission on file
2 https://www.score.org/resource/infographic/infographic-small-business-retirement-investing-your-future#:~:text=28%25%20of%20businesses%20with%20less,99%20employees%20offer%20retirement%20plans -- Permission on file
3 Setting Every Community Up for Retirement Act of 2019. New plans may be eligible for up to $5,000 a year over three years and an auto-enrollment credit of $500 a year over three years, for a total tax credit of up to $16,500
4 SECURE Act 2.0. The employer contribution credit is generally a percentage of the amount contributed by the employer, up to $1,000 per employee. This additional credit is limited to employers with 50 or fewer employees and reduced for employers with between 51 and 100 employees. The credit phases out over 5 years.
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This website contains articles posted for informational and educational value. SurePayroll is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, SurePayroll. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant. If you require legal or accounting advice or need other professional assistance, you should always consult your licensed attorney, accountant or other tax professional to discuss your particular facts, circumstances and business needs.